Wednesday, December 12, 2007

Tracking Promotions with RFID

As in most logistics practices, the net benefit of RFID coding depends entirely upon how the circumstances. In negotiating trading practices today, manufacturers and retailers should consider RFID as a viable technology that may provide mutual benefit if expectations, technologies and responsibilities are properly aligned.

In the heat of the Wal-Mart pilots, I suggested one such approach in an article published in Consumer Goods Technology.

Manufacturers often lament that the trade funds given to retailers to support product promotions are not fully passed on to consumers. Retailers buy more than they can sell during the consumer promotion period to hold down their overall cost of goods, and many divert "excess" product to other wholesalers or merchants. Regardless of why they over-buy, the impact on manufacturers is the same; their effective average prices fall below intended levels.

One remedy is for manufacturers to require retailers to provide proof that product purchased at discount for promotion are stocked in their stores during the promotion period. In this case, the manufacturer would ship RFID-labeled product cases to the retailer, noting which would be offered at discount. The retailer would then scan the cases as they entered each store and provide that information back to the manufacturer. The manufacturer would then remit a discount for each promoted case that crossed store thresholds during the promotion period. By tying distribution of trade funds directly to retailers' store-stocking activities, manufacturers can manage down diversion and gain immediate feedback on where and how well products are selling in relation to promotion terms
. - "Keeping Track of Promotional Progress," Jim Farrell and Ralf Saykiewicz, Consumer Goods Technology, October, 2005, p. 10

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